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Edited version of private ruling
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Ruling
Subject: GST status on the supply of medical aids and appliances
Question 1
Is the supply of a breathing monitor GST-free?
Advice/Answers
Yes supply of a breathing monitor is GST-free.
Relevant facts
You are an enterprise registered for GST and you supply breathing monitors.
Your breathing monitor designed specifically to monitor where there is a disability or illness that causes sleep apnoea.
Your breathing monitor is not widely used by people without an illness or disability.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
A New Tax System (Goods and Services Tax) Act 1999 Section 38-45
A New Tax System (Goods and Services Tax) Act 1999 Schedule 3
Reasons for decision
Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies.
Section 9-5 of the GST Act sets out the requirements of a taxable supply. This section states:
You make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and
(c) the supply is *connected with Australia; and
(d) you are *registered, or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
(* Denotes a term that is defined in section 195-1 of the GST Act)
Based on the information provided, the supply of the products satisfies the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you supply the products for consideration, in the course of your enterprise, the supply is connected with Australia and you are registered for GST.
The supply of the products is not input taxed under any provisions of the GST Act or any other Act. Therefore, what remains to be considered is whether the supply of the products is GST-free.
The GST status of the supply of medical aids and appliances is determined by the provisions of section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Medical Aids and Appliances
Subsection 38-45 (1) of the GST Act provides that a supply is GST-free if:
· it is covered by Schedule 3 (medical aids and appliances), or specified in the GST Regulations
· the thing supplied is specifically designed for people with an illness or disability, and
· it is not widely used by people without an illness or disability.
Once an item meets all of the above elements, then its supply will be GST-free regardless of whether it is supplied to a person who has an illness or disability.
Schedule 3 and the GST Regulations contain a list of medical aids and appliances which are generally used by people with various illnesses or disabilities. However, Schedule 3 and the GST Regulations do not operate in isolation to make the listed items GST-free.
The supply of any item listed in Schedule 3 or the GST Regulations as medical aids or appliances will need to satisfy all the requirements in subsection 38-45(1) of the GST Act before it will be GST-free. That is the listed medical aids and appliances must be specifically designed for people with an illness or disability and must not be widely used by people without an illness or disability.
Additionally, subsection 38-45(3) of the GST Act provides that a supply is not GST-free if the supplier and the recipient have agreed that the supply, or supplies of a kind that include that supply, not be treated as GST-free supplies.
Your product information states that your product is specifically designed for people with an illness or disability. Your documentation also supports that your product has been approved for sale in Australia as a medical and therapeutic device by the Australian Therapeutic Goods Administration.
Approximately only 2000 units per year are sold in Australia and therefore it could not be considered widely used by people without an illness or disability.
Schedule 3 to the Act lists sleep apnoea machines at item 128 and breathing monitors at item number 137. Your product is a machine designed to monitor breathing for sleep apnoea purposes therefore it is covered by both items in schedule 3.
Based on the facts you provided the your product meets all three criteria of Section 38-45 of the Act and as such its supply is GST-free unless the supplier and recipient agree to treat it as a taxable supply.
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